The generation of millennials (those born between 1982 and 2002) has been accused of wasting their money on expensive avocado on toast and going on pricey holidays, while neglecting to save for their future, but new research shows that the stereotype is misguided.
Royal London surveyed some 1500 millennials aged 25-34 on their views on long term saving and pensions planning, and revealed encouraging signs of commitment to long-term savings.
The research found that 56 per cent of respondents are currently saving in a pension for their retirement. Moreover, it points to the fact that 80 per cent of eligible millennials aged 22-29 are enrolled in private workplace pensions, compared to only 28 per cent four years ago (according to external research by the Institute of Fiscal Studies).
It is also encouraging to see that the research found 75 per cent of those surveyed would increase their pension payments automatically in line with a pay rise, and 40 per cent plan to do so next year.
However, the research states that millennials’ average pension contribution, at 4.6 per cent of their salary, is well below Royal London’s recommended level of 12-15 per cent needed for a reasonable income in retirement.
Other reports have gone even further, arguing that millennials need to save 20 per cent of their annual income to enjoy the same level of retirement income as the average baby boomer.
These figures, however, are likely to be more pie in the sky rather than realistic goals, unless millennials’ workplace schemes are generous, with contributions of 10 per cent or more.
Many millennials are in the position of juggling between paying off student debt and saving towards a house deposit. Over 30 per cent of them are not able to save any money whatsoever, according to research from Age Partnership.
The Royal London survey shows that although millennials appear to be taking their retirement savings seriously, they are by no means all in the same boat as far as their financial situation is concerned, with some already homeowners and others still having to live at home with their parents because of a lack of affordable housing or decently paid employment.
Steve Webb, director of policy at Royal London, says: ‘There is much speculation that the chancellor’s upcoming Budget will introduce tax cuts for the millions of workers in their 20s and 30s. If there’s public money to be had, then affordable housing and employment opportunities could actually be a better solution.’
Webb argues that improving the retirement provision of younger people is not just about pensions. It is also about making sure they can get on the housing ladder and have access to secure employment.
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